Tuscaloosa Hosts 50+ Mayors For Summit on ‘Biggest Threat’ to Alabama Cities

Tuscaloosa Mayor Walt Maddox hosted dozens of his counterparts from across Alabama Monday morning to discuss what he calls the biggest threat to major cities across the state - how sales tax from online sales gets distributed.

Maddox brought more than 50 Alabama mayors and several dozen city council members and administrators to the Tuscaloosa River Market on Monday to educate them on the Simplified Sellers Use Tax. It's a complex but important issue governing how to dole out the taxes generated by online sales across Alabama.

"Last year, we believe we lost $12.1 million to internet sales tax, and when I say lost, I mean dollars earned right here in Tuscaloosa, Alabama, that were exported out of our community," Maddox said. "Those dollars could have gone towards police officers, firefighters, paving roads. Those are dollars that we're losing that our community has earned and should get to keep."

If you buy something in person in the city of Tuscaloosa, you pay a 10-cent sales tax for each dollar you spend, and each $100 raises $3.57 in sales tax revenue.

Anything you buy online, whether that's on Amazon or Walmart.com or just ordering lunch or DoorDash, you pay 8 cents per dollar in sales tax no matter where in Alabama you live - the Simplified Seller's Use Tax.

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The issue is how that 8 cents gets split up, and Maddox said it's deeply unfair to the top 50 or so cities in Alabama. The state keeps half of all SSUT revenue and the other 4 percent gets split between county and city governments regardless of where the revenue was generated. Smaller cities and rural counties have seen their budgets grow with this money, but Maddox said it's coming at the expense of the cities where the lion's share of sales actually happen and where the goods are being delivered.

"The State of Alabama created a tax scheme that is socialism in approach and also punishing those who are making investments to grow our state," Maddox said. "When 16.4% of all retail now takes place online, there has to come a point in time where we address this issue."

Maddox has developed a series of real-world examples detailing the problem in understandable terms - buying a bicycle, or an engagement ring, or just a big breakfast before a conference like Monday's.

"If I bought $100 breakfast for those that are here today - let's say I went to FIVE to go pick it up, muffins and coffee, and paid $100, the city would get $3.57 [in sales tax revenue.] But if I had DoorDash deliver the same goods for the same $100, the city would get eight cents," Maddox said. "That's a $3.49 loss. You multiply that by the times it's happening in your economy with 16.4% of retail sales now happening online, and that's how you lose over $12 million in a year. That's how your school system loses $5 million a year."

The problem is even greater in larger cities such as Mobile, Mayor Sandy Stimpson said.

"In 2015, Paul Wesch, the finance director for the city of Mobile, walked into my office and said, 'Mayor, there's something going on that has created a major problem for us and it's SSUT,' though at that time, there was probably no mayor who knew what SSUT was," Stimpson said. "He told me then we lost $15 million of revenue that year, and this was in 2015. [...] I think that nobody, no mayors were paying attention at that time. Well, this past year, the number we lost was $34 million."

Maddox said mayors from every single metropolitan area in the state came to Tuscaloosa on Monday for a presentation then a roundtable discussion about SSUTs.Those leaders were shown data collected by the city of Tuscaloosa detailing exactly how much their own communities are 'losing' because of the current tax structure.

The idea is with detailed information about how this will impact them locally, those mayors and councilmembers can become educated advocates for reforming the SSUT and leaning into destination sourcing, where sales tax is tied to where an online order is delivered.

"We want to educate people about what's happening in their own community because if they look deeper, then they're going to naturally become advocates," Maddox said. "It's old as this country. In America, you should get what you earned. SSUT is the opposite of that."

Maddox said Tuscaloosa has already had to press pause on some of its grander future plans because without the revenue "lost" to this internet sales tax scheme, it's no longer viable to fund them.

"With what we're seeing, we're going to have to slow down, pause, and recalibrate," Maddox said. "That's not good for Tuscaloosa but it's also not good for this region that depends on Tuscaloosa for economic growth."

For ongoing coverage of the issue and more coverage of news from West Alabama, stay connected to the Tuscaloosa Thread.